[Federal Register Volume 70, Number 154 (Thursday, August 11, 2005)]
[Notices]
[Pages 46897-46898]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4349]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52210; File No. SR-NASD-2004-089]


Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Order Granting Approval To Proposed Rule Change and 
Amendment No. 1 Thereto To Require Limit Order Protection and To Expand 
the Application of Manning Obligations to Exchange-Listed Securities

August 4, 2005.
    On June 9, 2004, the National Association of Securities Dealers, 
Inc. (``NASD'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to require members to provide price improvement to 
customer limit orders under certain circumstances, and to expand the 
application of NASD IM-2110-2 (``Manning'' obligations) to exchange-
listed securities. The proposed rule change prohibits a member from 
trading for its own account in a Nasdaq or exchange-listed security at 
a price that is better than an unexecuted customer limit order in that 
security, unless the member immediately thereafter executes the 
customer limit order at the price at which it traded for its own 
account or at a better price.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    On November 2, 2004, NASD filed Amendment No. 1 to the proposed 
rule change.\3\ The proposed rule change, as modified by Amendment No. 
1, was published for notice and comment in the Federal Register on 
February 25, 2005.\4\ The Commission received no comments on the 
proposed rule change. This order approves the proposed rule change, as 
modified by Amendment No. 1.
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    \3\ Amendment No. 1 replaced NASD's original proposed rule 
change in its entirety.
    \4\ Securities Exchange Act Release No. 51231 (February 18, 
2005), 70 FR 9402.
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    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities association 
and, in particular, the requirements of section 15A of the Act \5\ and 
the rules and regulations thereunder. The Commission finds specifically 
that the proposed rule change is consistent with section 15A(b)(6),\6\ 
which requires, among other things, that NASD's rules be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, and, in general, to protect 
investors and the public interest. The Commission believes that 
requiring price improvement for customer limit orders as detailed in 
the proposed rule change, and the expansion of the application of 
Manning obligations under NASD IM-2110-2 to include exchange-listed 
securities, will provide the opportunity for investors to receive 
better limit order executions, and thus enhance the overall integrity 
of the market.\7\

[[Page 46898]]

    It is therefore ordered, pursuant to section 19(b)(2) of the Act 
\8\ that the proposed rule change (SR-NASD-2004-089) be, and it hereby 
is, approved, as amended.
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    \5\ 15 U.S.C. 78o-3
    \6\ 15 U.S.C. 78o-3(b)(6).
    \7\ In approving this proposed rule change, the Commission has 
considered the proposal's impact on efficiency, competition, and 
capital formation. See, 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-4349 Filed 8-10-05; 8:45 am]
BILLING CODE 8010-01-P